Is your coffee supplier ethical? Why a ‘fair trade’ label is no guarantee

Although it doesn’t happen too often, we do occasionally get asked about our coffee and especially is it ‘fair trade’?

We buy our coffee from Illy for several reasons. The first is that they have some of the best 100% arabica beans on the market. The second is that the reason they are able to achieve this is largely due to the close relationships they develop with their suppliers,  with whom Illy deals directly and pays significantly more than the standard price of coffee on the New York Stock Market.

On the discussion forum of the movie Black Gold, Illy’s PR Director Anna Adriani explains their position in more detail:

"First of all, illy coffee is not certified as Fair Trade, something that you’ll be aware of from watching Black Gold. We welcome and acknowledge Fair Trade but, I’d like to explain why illy can’t be a Fair trade coffee.

illycaffè is committed to sourcing the best Arabica coffee on the market thus producing the finest quality espresso. While Fair Trade certifies the growers and their pricing policy, it does not take into account the quality of the coffee produced. Fair Trade certification would require us to buy our coffee from Fair Trade growers, meaning that we couldn’t account for our product’s quality.
illycaffè pursues a policy of sustainable coffee cultivation which benefits the green coffee grower, the environment and the consumer, providing them with the highest quality coffee.

For the past 15 years, illycaffè has bought 100% of its green coffee directly from farmers across the world. This has allowed us to build direct relationships with our farmers that are founded on mutual respect and trust. We know our suppliers personally and work with them to give training and knowledge to produce the highest quality coffee.

In return, illycaffè always guarantees the coffee producer a profit. Confidentiality means we can’t disclose the specific price paid to the producers; which varies from country to country, and year by year. However, as an average price, illy pays 30% more than the coffee exchanged on the international stock market (New York).

illy calculates the price it pays for its coffee using a complex set of variables that have been developed over years of working directly with coffee growers. These variables take into account the price on the international stock market then country of origin, type of market, product quality, production costs and the margin for the coffee producers.

The ‘margin’ repays the farmer for taking the utmost care over the crops and always guarantees a profit, particularly when international green coffee pricing is low on the open market. The economic wellbeing of our growers is of vital importance for all of illycaffè’s stakeholders, for without the farmers, we couldn’t deliver the highest quality coffee in the world.

So in summary, illycaffè’s unique approach to sustainability is threefold. We work directly with the best farmers in Brazil, Central America, India and Africa; we transfer know-how and techniques aimed at producing the best quality coffee while respecting the environment and we always pay a sustainable price to ensure out growers make a profit."

When pressed further to reveal the price Illy pays for its coffee, Adriana continues:

"it is very difficult to reduce what is an extremely complex business into an easily digestible sound-bite. At illy we are dealing with over 3,000 farmers and doing multiple international transactions involving coffee of different quality.

As a consequence it would be impossible to express in one simple figure the answer that you are looking for. However as previously explained, adding 30% as an avarage to the market price of coffee traded on the NYSE will provide you with a reliable average guide.

To give you one specific example– during last coffee campaign in Brazil - illy paid one of its farmers in Araponga, Brazil 340 Brazilian real (GBP £88) for a bag of coffee, compared to the 240 real (GBP £62) he received from other companies that also bought from him.

As my previous comment explained, illy calculates the price it pays for its coffee using a complex set of variables that have been developed over years of working directly with coffee growers. The economic wellbeing of our growers is of vital importance as, without the farmers, we couldn’t deliver the highest quality coffee in the world."

In response to Anna’s comments, Tim Taylor from www.coffeeambassadors.com adds his own, very fair, independent analysis:

"Being an independent direct trade coffee buyer and roaster, I have spent a good chunk of my time researching the Fair Trade certification. While the Fair Trade certification has accomplished wonderful results in terms of raising global awareness of the imbalanced system of trade affecting coffee farmers (and farmers of other products as well), it is not necessarily the best means to empowering coffee farmers to succeed.

Anna raises some excellent points to consider. By working directly with coffee farmers, Illy is uniquely qualified to determine precisely what is fair for an individual farmer to receive. According to Anna, Illy has direct, long-term relationships with growers that are founded upon mutual respect and trust. Now, that sounds great! But it appears to be unverifiable. Transparency with both the farmer and consumer is, in my opinion, the only acceptable form of trade. And for those who have concerns with regard to social justice - demand transparency from your coffee company of choice. And if they are unwilling to be transparent - switch. Transparent coffee companies exist. And they usually have some of the better coffees.

More often than not, the quality behind a cup of coffee translates into quality of life for the grower. I want the best cup of coffee I can get my hands on. And, I’m willing to pay for it, too! Anna is right, Fair Trade does not provide a way to get the highest quality coffee available. We don’t simply want to give a hand-out to coffee farmers. In the long run it doesn’t benefit anyone. What helps is to empower them with the incentives and training that come through direct relationships – which Anna also mentioned. Paying them for quality encourages them to take pride in their product. When they’re paid well, farmers can afford the expense of various quality procedures, such as picking only ripe cherries, a regular pruning schedule, and fertilizing organically. These basic procedures culminate in a cleaner, more flavorful cup of coffee. The farmer who is proud of his coffee will do these things and more… if he can afford to.

The Fair Trade system does not promote farmers taking pride in their work. It doesn’t reward them for going the extra mile. There is no incentive for providing top notch coffee. Any farmer who does work extra hard will never be recognized for their efforts as long as they are selling their coffee through their Fair Trade cooperative. Coffee from all different farms within the coop is blended together. There is no distinction.

Additionally, farmers do not get all $1.31 of the Fair Trade standard per pound of coffee. A good percentage goes toward cooperative fees and the expense of being certified as a Fair Trade cooperative. Ultimately, a Fair Trade cooperative coffee farmer receives closer to $1.05-$1.14 per pound.

When all is said and done, I would recommend purchasing coffee that makes transparency a priority. Choose a coffee company that is willing to tell you what goes into their farmers’ pockets (not what they pay an importer). There are advantages to Fair Trade, third-party certification, but, that doesn’t mean it’s the absolute best thing for the farmer.

I like Illy’s method of relating directly to farmers and paying them for quality. I empathize with the complexity of calculating payments on individualized criteria. And I can understand the need for confidentiality in business contracts. However, the only way to know if any coffee company is really paying farmers well is if they are transparent with consumers."

The bottom line is that although ‘fair trade’ coffee has laudable intentions, it is neither a guarantee of high-quality nor an ethical  supply chain.

Furthermore, whenever transnational bureaucracies and NGOs are involved in ‘certifying’ products in a multi-billion pound industry, the potential for exploitation and falsification only increases.

Its interesting that Illy was the only major coffee manufacturer that was willing to open its doors and be filmed for the ‘Black Gold’ movie. They should be applauded for that.

However, I look forward to hearing more from Illy in the future about the mutually beneficial relationships they have with their farmer suppliers.